tv Fast Money Halftime Report CNBC August 5, 2013 12:00pm-1:01pm EDT
and schuman writes if they want to sell the surface, advertise how well it skips across water. splash. >> blackberry is a popular fruit. >> interesting marketing ideas. dow is stubbornly down 50 points. we'll see what happens this afternoon. >> and and back to headquarters and scott wapner and the halftime. >> welcome to the halftime show. four hours to go until close. down across the board right now. there is the nasdaq and it is down two. here is what we're following on the half. the road to 2,000, some on wall street say that's where the s&p and heading. we'll tell you where we get there. chipped or broken, qualcomms under perform the market and is a turn around in the cards? one trader says yes and another no which means we will debate it just ahead. the top story, follow the money, new numbers showing a record amount of cash flow into the
equity funds and etfs in the month of july, this at a time when other data unveiled exclusively by us in just a few minutes suggests the retail investor is growing more bearish by the day. what's the best strategy for your money now? in the market or out? we're trading with josh brown and joe and steve and stephanie. josh, in the market or out? >> always in. the degree to which we're in may fluctuate. always in. here is what i want to you think about right now the consensus thinking is that we're just going to muddle through. if that's the case, you have to say is that stocks are pretty fairly valued at. it is obviously to find a bull that will tell you stocks are cheap in a muddle through scenario. there is a new dawning right now amongst a lot of market participants that maybe muddle through is not guaranteed. maybe we do something more. maybe we have actual economic growth and there is no concrete evidence but there are signs
everywhere, look at this morning services ism come in and red hot. look at the continuing gauge that we're seeing elsewhere. all i would tell you is it is too early to tell if we're really going to get growth. if we are, stocks might be cheap. if it is just muddle through, i don't see any reason to be adding a ton of exposure here. that's the decision you have to make. >> glass half full, glass half empty, view of the market? >> i would say the glass is probably somewhere in the middle because it is not -- and i don't usually equivocate. the reason i say that is we're trading at new highs and definitely not half empty. is the glass half full? i think we had a lot of movement in the market. here is how i am looking at t we can't draw any conclusion from today. friday we have hthem come out ad say i need to see the whites of their eyes before i cut back and that took the market up and erased the gains. we're due for not a major sell off. we're due for a consolidation. the market should pull back,
maybe the 5, 6% and off to the races. europe is improving. china is still a mess. the only question is do they paper over their problems and do we never see except in the multinationals? i am still positive, took my trading positions off and not putting more on yet. >> goldman sachs is out with what you would consider to be a glass half full sort of view and to set the stage for a lengthy period of above trend growth. we get through this little period here and we're going through and then you have above trend growth and glass half full and that means that you would side, would you side with the view that supports the money coming in in july? a record amount of money flowing into u.s. equity funds. >> i side with and i continue to side with buying at these highs because i think further appreciation in the market is going to happen and everyone's expectation is august is going to be a horrific month. if you go back historically, august has been a bad month. >> said that about may, too.
>> i continue to see there is going to be tapering in september and the ism services number today suggests q3 gdp may approach 3%. i am adding to consumer discretionary. i agree with steven you could have a consolidation. i think you will see a rip higher. i think gold as i said a couple of weeks ago, i think gold will fall another 20 to 25% from where it is here. you will have all of these portfolio managers to get inflows of actual dollars that they have to put to work and no matter what their opinion of the marketplace is. and i don't see any real correction in the next couple of weeks and i want to keep buying it here. >> do you agree with that? >> i think that earnings season is a lot of fun and you get to listen to what each company has to say. we have taken two different approaches. on the one hand we're buying the stock that is we like and that
get hit on earnings and so anadarko, occidental, timkin, eaton on friday. those are the names we're buying on weakness because we believe in the long-term stories. on the flip side you have good numbers like schlumberger and aig and we add to them because the trends are very favorable and i think they're doing a good job managing through a muddle along scenario as josh said and i agree with joe that i think the underlying data is a little bit better for the economy and we have a bad jobs number last week and we got good pmi and good ism and pending home sales and decent data from overseas, so i think you can be very stock selective and be buying. >> why do you have to be so stock selective, if the data from overseas is coming in better and the data in the united states is coming in better, if those tides lift the boat of the u.s. stock market as a whole, why do you have to be so selective? >> you don't have to. if you do what stephanie does, try to out perform the index, of course, if the index might stall here and you can be in better
names or cheaper names, a better shot to do that. for most investors they really don't have to be quite as stock selective. i would advocate maybe being sector selective or geographically selective. i don't see a need, for example, piling into the russell 2,000 at 20 times earnings when you have the ability to get long other places in the world that may catch up to the recovery that we're seeing at 11 and 12 times earnings. i think you can be selective in different ways but you certainly don't have to go out there and buy the 5,000 making a huge beta bet. >> and i actually disagree with you because i think this is the exact type of environment that you want to go out and actually own small caps. this is where the russell is going to out perform and just to use a stock as an example of the environment we're in here now and what you asked me before, it is the same story we heard in may, facebook, everyone waiting for the pullback, myself included. this pullback is not coming. >> what does it have to do with small caps. >> looks like it is positioned to go to 40. when you talk specifically about
small caps and the environment that we're in right now, and you have the world with the chinese economy right now, we're suspicious of it, i want the exposure to a higher u.s. dollar and exposure to earnings that come generated domestically, small caps give you that and you are beginning to see a little bit of acceleration in terms of growth, not labor, but actual growth, again, that takes you back to small. >> you could have owned apple. >> and instead if you owned facebook will you actually have done much better versus apple. it is a stock picker's market. >> it is always a stock picker's. >> small cap this is year out performed all the others. >> small caps since the bottom in 2009 are up more than 200%, way ahead of the s&p. i am not sure that's a new story. i just think that the differential in relative value has grown to such i agree that people are really starting to notice it. what i would tell on you the small cap trade, it is not that they're good or bad or whatever the case may be, to stephanie's point, they're going to be i
think a dispersion between winners and losers here. >> that's why you don't want to own the index. that's why you want to be a stock pick. it is always a stock picker's market if you own average by definition you're mediocre. that's the average. it is always stephanie, i always want eaton on friday and it came off and those are where the opportunities are with fairly valued at, 16 times, historically, that's better than average and you want to go to stocks >> we mentioned the new data showing how the individual investor is currently feeling about the rally. let's bring in j.j. of t.d. aameritrade. >> it ties in really well to what they just talked b the investor, the index is 4.87. what that really means, put it in perspective, it is off from last month. it is actually the lowest level we have seen since january of 2013. the real reason i like this is one of the things we're seeing, back to exactly what you guys are saying, the retail investors
is becoming smarter. they're taking profits in names where they made money. a few of the names we can talk about, cisco, hewlett-packard, time warner, we're seeing our investors sell those names. >> there is a difference between taking money off of these high flyer names and being bearish. >> i agree with you. they're not bearish. they're not as involved as they were. you talked about the mutual fund report that came out this morning that showed people putting more money into funds. the difference is the index, it measures the total engagement, not just funds, individual names. their options position in those individual names. so it gives i think a better perspective. i am not saying they're bearish at all. i do think they're waiting, perhaps, you know, maybe not as joe had said, the best time to wait for everything. this he have taken off some of their profits. they have bought stocks like coke and boeing and some of the stock that is got beat up in some of the earnings that came
out also. >> they're doing exactly what -- >> so what's the net equity exposure? >> it is now 5% from june to july. >> what percentage of the flow into mutual funds would you capture, so, in other words, you are seeing the options trading and if they instead say, okay, i am taking my money out of there and going to fidelity or maybe a fund not in the platform, would you see all of that? >> we measure everything and our flow, steve, we also have the largest client base with 6 million accounts so much larger than everybody else's and what i think this shows is that the investors overall have been smarter about how they are using their money. >>? june when i looked at the fund flow data on a weekly basis, it seems as though the retail component or merrill lynch when they tracked it, called private client, really freaked out during the rate backup and five week period and they sea more
non-committal than ever and perhaps it explains the preference for etfs which are easier to sell quickly than mutual funds. could you speak to that fear, how it is still there? >> i think it is a great question. if you think about june, june was a high level. we were up in june significantly because many of our clients bought and got involved and that is july. the rally continued. people are taking some money off the table. it is something you do as professional traders every day. when you have some money and you take it off the table and reassess. you bought up facebook and apple. i think those are also very interesting. our clients continue throughout july to accumulate facebook, accumulate apple which ended up being pretty good after that and also tesla. the interesting thing to me about facebook is as we come into august, how will they react? if you remember, this measures july. facebook got up end of july and beginning of august. i think it will be really interesting to see how they did
with that because everyone expects all the retail investors to get out as we got back. >> thanks. >> thanks, guys. >> if investors are growing more bearish, wall street apparently is not. our next guest just put out a note this morning saying the s&p will hit 1850 by the end of this year. and touch 2,000 in 2014. craig johnson is with piper jaffray live in minneapolis. why the 1850 bump today? >> so for a lot of the reasons we raised or established i should say a year end price objective of 1850. it is just another mile marker on the road to 2,000. what we're seeing is a lot of strong looking stocks and groups and positive inflows because funds and as we have been out marketing and seeing various constitution institutions we're hearing a lot of request for new products and we also saw over the weekend in the weekend reading, the fact we have seen $18.4 billion come out of the
pimco funds and we have seen from the lipper data $2 billion plus go into equity funds just last week. the money is starting to starting to rotate into equities and that's been the premise of our thesis of why we did 2,000 and we think we're well on track to do that into early to late 2014 from our perspective. >> what if it is just mom and pop money finally coming into the market? i don't know. some would question whether it is the right time or the wrong time. >> if we go back and look at history and periods like 1952 and 1982, when we saw a secular changes of interest rates occur, that's also one of our calls that rates yields on the ten-year bond yield bottomed and we'll see rates continue to rise higher from here. we're looking for ten-year bond yields to rise 3.4% over the next 18 to 24 months. when we have seen the secular
shifts occur in the bond market, we have seen a corresponding shift out of fixed income and back into equities. we think it will propel this bull market even higher levels than what we're seeing today. >> you suggest investors be right now or where? >> we have seen the best relative strength in our work in the industrial manufacturing space, consumer, cyclical, and also financials. the weaker area from our perspective continue to be energy, basic materials and also the utility sector. >> joe. >> i disagree. i think when you look globally, in terms of supply/demand balance, it certainly points to higher pricing and just to get back for one second on the industrial space itself, when you look at the regional manufacturing figures, it looks like there is up turn. we have had a couple of folks in the last couple of months come out and take large short positions in some of these industrials. take a name like caterpillar, do you have enough confidence that are you seeing that you would believe this is the trough point
for that? >> from our perspective caterpillar is one name inside the industrial index and you look at johnson controls and borg warner, for example, they're breaking out of two-plus year base and looks like it is a good solid play and recovery in the overall automobile space and if we can get autos to recover and housing to recover, i think we're going to see a nice improvement in gdp as you move forward into the second half of this year and 2014. >> thanks for coming on. we'll talk to you soon. >> thank you. >> quick comment from the desk. who want it is? >> what's surprising is he is looking for another 10% up this year which takes us up 30% in the year and then you look at next year, we're only up 7%. that's not a good risk reward there. >> i like borg warner. we have been on that name for a long time and i think the auto and auto cycle, auto parts cycle. >> and last couple days a lot of work looking at caterpillar and i think it will be a battleground type of stock over the next couple weeks, and some of these regional manufacturing
figurings are turning and i don't have a position yet but i will say. >> you're looking to take a position. >> yes. >> you are, too, right? >> we're setting up a great debate. >> i think within industrials there are easier places to make money like hvac for example and those stocks are very attractive and particularly the interest in technical basis, but fundamentally that's really an area of strength. >> i am getting ready to buy cat at $50, ten times the $5 a share. >> good luck. >> we have a lot bigger problems. >> coming up next, halftime trading the globe and top portfolio manager breaks down why now is the time to get bullish on a shaky europe and later don't look now. we mentioned this earlier. facebook hitting a new 52-week high. it closed above $38 a share on friday and there it is now above $39. we continue to follow facebook's move. it is up 3%. we'll tell you how to trade it next.
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year-to-date and also the assets under management falling from 12 billion down to 11.16, again, that is a portfolio update if you will directly from pershing square, information in a letter that cnbc has obtained. chat about this for a moment here. everybody seems to be talking about herbal life and there have been some obvious other misses in j.c. penney and what people seem to forget for some reason is canadian pacific, ggp and i know the performance 4% year-to-date is whatnot the market has done but not like all of the hedge fund guys have been knocking it out of the park so perhaps we should realize the guys had pretty good winning investments as well. it is not a portfolio built on herbal life and j.c. penney alone. >> you're 100% correct. when you look at where is the price of herbal life going, you do have to understand right now
who has a position, who has a big position and who right now has a position that looks like it is on the ropes? i think that's the conversation you're looking at where is herbal life going and right now it appears that those that are playing herbal life from the long side have all the pressure mounted on the bear. it is not an indictment on the career, i agree with you on that. i think he is in trouble. >> nor is it going to have a substantial impact on the overall viability or success of pershing square. >> no. >> win or lose. >> he has permanent capital there also, but i don't think that's the issue. i think the issue is has he swayed from his discipline a little bit by taking such a huge short position which he has never done before in a company and if you take a look at target, let's not forget that. that was close to 2 billion that went up in smoke, so in fairness, you have to bring it back. having said that, he still has done a good job.
that's scaring people. >> in all of the context of this conversation few people bring up the home run swings that he has taken that have knocked the ball not only over the fence but in some respects out of the ballpark altogether. >> p & g, total home run. >> you are correct in terms of actual loss that he has, it is probably a couple hundred million on was he $10 billion plus that he manages, but how much mental -- >> and that's another one that has done well obviously. >> how much mental capital is he spending on all of this? >> given the headlines, it is actually unbelievable how much of the capital he has held onto, given the non-stop parade of people bashing him, bad publicity, talking about the individual positions, and his mindset, and i think he is doing a pretty good job for his lps
and employees. >> he has aing long-term track record or he wouldn't have near $12 billion under -- >> i think 17% which is great but the issue is why would he want to do it? >> that's a different conversation. >> that's the whole thing. some investors, at least the ones i have talked to say why would i go in there? what is it about now? for people that are below the radar and still putting up good numbers so ultimately the stories work out because they work out, not because of momentary disruptions because you're out in the press. he is. he has done a good job. you can't take that away. >> with the u.s. markets hitting all time highs, is it time to look elsewhere for value? our next guest says it might be time to get bullish on europe. for more we'll bring in katrina dudley, portfolio energy at franklin mutual advisers. welcome. good to talk to you again. >> great. >> you are starting to hear people beat the drum for europe. why now? >> we think that europe is still a very cheap market t trades at
a discount to the u.s. market. if we have a look at u.s. earnings, they're about 21% higher than their peak. europe is 36% lower. we think there is a lot of opportunity to buy cheap names in europe. >> the numbers that have been coming out today, the u.k. pmis, the best in however many years and so the data does seem to be supporting the view that now is not a bad time to take a shot. >> if we have a look, the manufacturing pmis in the core and the periphery are both above 50, and that's expansion territory and haven't been there for more than two years. if we have a look at unemployment, it is not as though there is an unemployment number reported for the entire region, but if you look at germany and lower since it has been in the history and we look at spain, their unemployment rate has started to decline which is positive. >> you talk about germany. is that exactly where you want to focus and i am not saying buy the index and look at bmws and the german equity that is should out perform the rest of europe.
>> we're seeing aloft opportunities in what we call domestically oriented franchises. a bmw, for example is really an exporter and sells its products in europe as well as outside of europe. we're seeing opportunities in companies that sell their product in europe to europeans. >> if tai i take a look at ital the ten years, before the crisis, it hadn't grown at all. lots of corruption, people don't pay taxes and you have germany coming up and elections, so two questions. why would things change versus what they were before the financial crisis and how important is it that merkel be re-elected for people to really fall in love with the stocks? >> two questions there. the first is the italy situation. we think italy introduced regulatory reform into that market that is unprecedented and we think that regulation is really going to drive growth in the italian economy f we go over to germany, we do believe that
merkel will be re-elected and germany has a history of grant coalitions and we think they will once again form a grant coalition and with 77% of germans in favor of the euro we think business will continue as usual. >> c & h is one of the stocks you like and you liked it last time and it has been a great one. the profitability metrics and the return on invested capital is quite a bit below some of their peers, deer and cat specifically. what specifically do you think they're doing that can get that to be on par or duke it could be better over time. >> we see an opportunity to improve the margins at cnh which is a farm equipment business what we own is industrial, and this is a special situation for us, so it is an italian company. it is simplifying its corporate structure ask and we think the market is not giving them credit for that corporate simplification. they are going to list here in the new york stock exchange market it will be a $15 billion market cap company, and we think that investors are missing an
opportunity to buy shares in a company at under 10 times earnings. now, if are you a u.s. investor and you want to own, it will you own cnh and get converted into stock of the new company and it is a name we find in the sweet spot. >> last name, acor. >> a french hotel company. it is moving from asset heavy toy asset light strategy and what they have done is ousted the ceo and the market thinks this restructuring is off track. we don't believe it is the case. we think that it is 6 billion market cap company, you are looking at potentially a billion euros of capital coming back to shareholders. >> it looks like excuse me for interrupting as you look at the chart, throw it back up. it looks like it started to have a little bit of a rise since may. >> we see the stock could easily double in a three to five year basis.
>> frank republican mutual, you do have a more steady stream of people beating the drum on europe, a well known wealth manager that i spoke with last week, a couple weeks ago making a call on europe as well. >> josh and i put out pieces in the last and talking about the turn in europe, and i am just glad katrina was here to give steven more of an appreciation. >> fiat is a got story and quietly selling. >> the stock is falling after an analyst says smartphone growth is over and one of our traders disagrees that means we will debate it and today marks the two year anniversary of the s&p's downgrade of america's credit rating. >> two years after the downgrade what lessons has washington learned since then? have they learned any lessons at
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welcome back to the halftime show. let's do our top three trades now. first up, kraft, downgraded over at jeffries. down 1.25. >> and goldman sachs put out a note the other day, too, all about questioning the valuation and can it continue and looking forward into 2014. will you see cost inflation coming in for kraft and i will point out they're stealing market share in the coffee segment and the stock has done well and what would i do underneath the market and i would just own some puts. >> next up, tyson foods beating on both top and bottom lines. josh, what do you see with the stock up 4% today and one year, 92%. >> i have to tell you, i hadn't been watching this thing. this is one of the best charts i could find out there period t really looks incredible. no resistance. company beat earnings by a dime and beat revenues by 100 million. serious momentum, costs are not an issue anymore. i think she is going into the 30s.
>> facebook, we mentioned it already, closed above 38 on friday. second time since the ipo, it is above 39 now. another gain of 2-3/4%. what do you make. >> i thought it would take long toer get through 38. i said it last week. i am pleasantly surprised because we own it. we did trim a little bit today given the move it has had. today's move is really because piper jaffray raised the target and you will see more of these. i don't think people want to get ofl the bandwagon yet particularly since there is not a catalyst either way. >> weiss, what is your take at this point on facebook? are you a believer or no? >> doesn't matter if i am a believer or not. the valuation is going to keep me away from it. i know josh says valuations reason for the stock and bottom line is i would rather buy google which is so dominant in the space that i need to see another couple of quarters from facebook and by then it will be
too late, stock will be higher. >> the stock trades at 38 times ex cash and just grew earnings up 61% and revenues need to dock 50% if you look at the growth they have put up and the growth they can put up over the next couple quarters, it is expensive but not as expensive. >> you can get a beta stock a lot cheaper ex cash than facebook is. >> everybody is in. >> i understand. >> so bottom line is this stock is going to keep going because there is no reason for it not to. until you get another metric and that will either drive it higher or make people regret they bought it at the top. >> i wonder what happens at the next earnings report, the stock got such a huge jump off this last quarter's numbers, that now, okay, the expectations get ratcheted up and the numbers will have to live up to a stock that has risen so far and so fast. >> wait a minute. wait a minute. i think they have business momentum. i think they're in the driver's saet.
this he have 1 million advertising customers on the site right now and i think they're taking early success and capitalizing on t i think it is business momentum which means earnings estimates may not be ratcheted up to the point they can't beat them. this can go on for quarter after quarter. >> i am not suggesting they won't be able to beat them. i am saying the street may expect massive. >> and in the meantime it is still under owned. >> there is ai long time between now and the next quarter. the stock could go up another -- >> that's my pointed, right. >> the bottom line is fundamentals don't matter until they report. the only thing that matters are people coming in that lost money in the ipo, driven by retail, think they know a name and get involved. >> s&p downgrading america's credit rating two years ago today and with a budget battle on the horizon, how do things stand now? i guess it is hard to remember those days gin what the stock market has done. >> yeah, absolutely. a different economic picture today than it was two years ago,
but the question is washington any different? remember, when the s&p downgraded the united states of america, they said it was large areally because of the political dysfunction in washington and here on the two year anniversary we're going into another period of political dysfunction. congress is out of session. they have gone out for the august recess. they will not be working on this any time soon. no indication there is any major progress here at all, but we are facing coming up in september the end of the fiscal year here in washington. they'll have to have some kind of budget deal and there is a question about whether or not they can pass a so-called continuing resolution to extend the funding of the government, and then of course we're going to reach the debt ceiling at some point later on this year. two big financial fights we continue to have we'll have them again this fall and there is no real indication there is any compromised territory here between republicans and democrats in washington. that gridlock that s&p put its finger on two years ago is still very much in place and not a real clear map to a solution
here, and the question is was s&p right two years ago to downgrade the united states given all the good things that we have seen in terms of the stock market, the economy, and also remember, scott, the deficit is actually going down because we have cut spending and increased taxes here in washington. deficit picture looking better than it did even earlier this year. >> i wonder the stock market's performance and the better economic data of late, factors into the whole argument, right, whether these guys and gals down in d.c. can get anything done and what the impetus to do something is and the back drop, they were cared before perhaps that not doing anything would cause the economy harm, would cause the stock market to go down, et cetera, and the economy is improving, and the stock market is at record levels, even in the face of dysfunction and complete dysfunction in d.c. >> yeah, and has the downgrade itself lost power? two years ago people were terrified of a downgrade and it made all the papers and it was a
big deal and there were little consequence from it and now our lawmakers fearful of another downgrade of another ratings agency and s&p taking further action and i don't think so. i don't think they feel the fear at all. i think the ratings agencies in many ways are a little more on the sidelines than two years ago and big players then and not so much right now. >> thank you. next on the half qualcomm under perform this had year and lower again today. you have with our traders thinks the hard times have just begun and another says the stock is too cheap not to be long. with the market lovering the aall time ties find out how one strategist says to play the market right now. we'll be back. (announcer) at scottrade, our clients trade and invest exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me.
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welcome back. shares of qualcomm lower today after piper jaffray downgraded the stock citing lower high end smartphone growth. should you take advantage and get long? we debate it. josh brown is the bull. stephanie is our bear. make your bull case. >> there has been a dip in growth. the question is is that something temporary or secular? i think the answer is very obviously temporary so we like the name. the downgrade has not really affected the stock. it is down a little bit. it is a dollar away from a
12-year high. i think it goes bottom line this is a 15% grower annual basis and able to buy it for 13.5 times forward and very little debt and tons of cash and tons of flexibility and number one spot in virtually every category they play with. stock going higher. >> i think the smartphone market is really challenged. it is part of the technology i don't like. we are definitely seeing a deceleration in the high end smartphone market. and you are seeing a shift to the low end. and we have heard that from htc, samsung, several semiconductor companies and the foundries are cancelling orders and there is a clear trend. i don't think it is temporary as you suggest. i think it is more competition in general and saturation issue. i think that's going to have a big problem on their operating margins. they have already fallen 250 basis points from the mid-20s to upper betweens if you will and longer term the royalty revenue stream and longer term the royalty revenue stream, a third of their total revenues, actually is going to decline as
they sell more of these units in developing markets versus developed, again, more pressure. >> i think the street has gotten comfortable there will be a mix shift between high end and low end and i think frankly it is a bigger pie. we could la meant the fact that there is going to be a lower margin when you blend it, but keep in mind still growing market overall and qualcomm is the primary way to benefit. >> let me ask you this before we turn it over to the jury. you could have made a very similar, i suspect, argument at the end of the la year or the beginning of this year for the reasons to own qualcomm. why has it under performed. >> made a high in 2012 and backed off because of the concerns stephanie brings up are completely valid. the thing is the market is now comfortable with that and it has taken the stock back to the 2012 highs and i wouldn't be shocked if it breaks through this week and i have to tell if you that up thats, you don't want to be shorted. >> and trade 15 times forward estimates and historically between 13 and 17 times. i wouldn't say it is extremely cheap and discounting a lot of
bad news. >> i have to go to the jury. steve weiss, you no longer own this name, a name you liked for a long time. >> i don't. i am not missing it. it is very frustrating. >> do you think it should be the more compelling argument? >> actually, you know, here is what's interesting about it and why. i cut back positions. number one, if you look at the way stephanie was looking at another stock we just talked about, they have 30 billion in net cash, marked cap of 100 billion, ex cash extremely cheap and the company is not only about smartphones, the company is also about all mobile computing, whether from tablets, cars, homes, you want to program so there is huge growth and no company better suited to handle compressing margins than qualcomm. however, my uncle saul used to say i will make it up on volume. well, there is no additional volume. i am not the one in favor of that. i still think returning 23 billion in cash to shareholders that your risk is minimal.
>> just won the debate, i have to tell you. >> i am all in with josh on this. i think you buy it here and you look at the average selling price on the smart phones that increase 6% quarter on quarter and smartphone average selling price would be down. chipset average selling price up 8% quarter on quarter. i think the turn is here for qualcomm. >> i go back to saying for the long-term revenue royalty rates, that's two-thirds a profit and a third of the total revenues and those are actually going to be coming down substantially, substantially from 20% levels to single digits ore the next several years as you see this transition. in terms of pricing on phones, why did operating margins fall 250 basis points if they're handling the lower prices better or handling pricing better that you suggest, joe, i just think that at this point that it is not extremely cheap, that a lot of people own it, and i think maybe your best in a trading range environment, i think there
is a lot of other technology places i can put money. >> tell us who you think won the debate. tweets us and use the hashtag bull or bear. we'll give you the results at the end of the show. back to the overall markets our next guest says that big gains may be over and now is the time to be selective. mike ryan helps manage more than $890 billion in invested assets and joins us from new york. mike, welcome. good to talk to you again. >> hi, scott, how are you? >> i am good. we have a bull at the very top of the show and who raises his target for the end of the year and technical guy and 1850, more than 2,000 on the s&p next year, and why is the money already made? i know we have had tremendous gains this year. let's put that on the table. why is it done? >> first of all, think about where most of the gains have come from over the course of let's say really the last 12 to 18 months, come from a ratings stocks so the equity market it is, we rated two whole points and went from 12.5 to 14.5.
you can't make the argument this market is now compellingly inexpensive. i think in order to make gains going forward we'll largely be on the back of earnings and we're looking for mid-to high single-digit earnings gains. i think what you will see is we had 8% gains over the course of the last five years and up over 20% so far for the year and going forward to the second half of the year we have to be very careful about where we're positioned in the market and make sure we get leverage to where the earnings growth rob improving and pockets of evaluation. >> earlier on the show we debated small caps. i think what's interesting there is that right now you have the situation where everyone talks about profit margins having peaked and they're always talking about the s&p and small cap margins running about 30% below trend, about 7%, should be closer to 10 historically. does that argue for more room for that area of the market to progress or not necessarily? >> it does, josh. in fact, there is two aspects we look at. first of all, where is the potential for some continued improvement in the margin and
also remember that they tend to be more geared to the domestic recovery process. again, we just got the ism numbers last week. while certainly the employment numbers are a bit disappointing i think we want to focus on what's happening in terms of the overall improvement in activity and i think the ism manifests itself and it is a domestic driven recovery that tends to bode well for the small to mid-cap tech sector. >> where are you on the taper, september, december, what type of impact on the market? >> this is a really close call. if you look at the balance of the data we have seen over the last couple weeks or so, it probably has made the case a little bit more for an earlier tapering. we will stick with december for a couple of simple reasons. september versus december, i don't think it will have a huge impact in terms of fed policy. keep in mind earlier in the show you were talking about some of these issue that is are coming up in the autumn. we know we have another round of fiscal gridlock potentially coming and that will probably hit us towards the end of
september and october/november, so i am not sure you necessarily want to taper ahead of what's likely to be a contentious session of congress around the debt ceiling and the budget. >> i know i have to run and they will kill me in the control room. are you saying december for the taper. >> yeah. >> yet the easy money has already been made. if the taper pushed off to the end of the year, maybe the easy money is still there. >> no. again, i think what are you talking about september versus december in terms of the tapering, this is not going to be a huge driver of the market because we're talking about the beginning of the end of the most accommodative phase of monetary policy and the three month period. if you say i want to play this for a three month change and therefore i want to take a really aggressive bid on stocks, i am not sure that's the way you want to play t i would rather be selective here. >> thanks. you tweet t we trades it. halftime heading to the twitter verse and turning your requests in into winning trades. schwab.com/trading to-284-t tdd#: 1-800-345-2550
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. well, not so fast, steve weiss. a couple months back mr. weiss took the bear side on hp in a "halftime" debate. let's listen. >> management, by the way, that got into autonomy and other misstep, meg whitman, easy fruit's been picked. >> how does it -- >> will that be short lived, absolutely? this is a dying company. >> a dying one that only happens to be up 27% since that call. steve weiss, also the best performer in the dow this year. what do you do now? >> if i had to change what i did, i wouldn't have gone
against somebody like murphy so due to win a debate so let's chalk part of that up to it. i was wrong on it. they had more gas in the tank. i still believe that the prospects for the company going forward are not good the it's still the same board that made all those mistakes. i would take my strength, and would i sell into it. >> you've got to give meg whitman some credit. >> i do. >> don't you? >> hey, absolutely. i mean, she's done a great job in terms of pushing the right buttons and using the cash flow. >> piloting a plane with one wing. i give her a lot of credit but it's not going to help. >> it was so mismanaged before there was low hanging fruit, a lot more low hanging fruit than i anticipated. >> final trades up next. i'm beth...
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this summer was definitely worth the wait. ♪ summer's best event from cadillac. let summer try and pass you by. lease this all-new cadillac ats for around $299 per month or purchase for 0% apr for 60 months. come in now for the best offers of the model year. the results are in. the people have spoken, and you said that josh brown won the debate on qualcomm. >> stephanie link still smiles. >> she's happy for me.
>> happy for me. >> joe, final trade? >> nxpi, stay long. >> josh brown? >> vaw, going higher. >> stephanie. >> i like savan tech. >> and american airlines. 20% higher right now today. that does it for us. don't forget there's more fast at 5:00. have a great rest of the day @scottwapner. "power lunch" starts right now. >> "halftime" is over. "power lunch" and the second half of the trading day starts right now. >> good afternoon, everybody. refis, they are not driving in the revenues. rates scaring some respective homeowners away so how are the banks playing the lending game right now? they are loosening up on some of the high standards that kept some people out of the market. diana olick has the details in one minute. conversation or collusion? sources tell cnbc that bill ackman has filed a complaint about federal regulators against george soros for breaking insider trading rules by alerting other hedge funds about a big investment in rb